Shell reveals $3.5bn share buyback as it faces AGM showdown over emissions

Shell will shower its shareholders with another $3.5bn (£2.8bn) in share buybacks over the next quarter after reporting better than expected profits of almost $8bn for the first three months of the year.

The company announced it would hand investors the multibillion-dollar payouts as it prepared to face a shareholder battle over its climate agenda at its annual general meeting later this month.

Shell’s “staggering cashflows” resulted in adjusted earnings of $7.7bn for the first quarter, below the $9.6bn earned in the same quarter last year but still well above the $6.5bn predicted by analysts.

Its chief executive, Wael Sawan, said the results released on Thursday had given the company the confidence to start another $3.5bn buyback programme for the next three months. Its shareholder payouts in the first quarter came to $5bn, of which $2.2bn was dividend payments and $2.8bn was share buybacks.

The oil company, which handed investors $23bn in payouts last year, had one of its most profitable years on record in 2023 when it reported better than expected profits of more than $28bn for the year. Shell paid £1.1bn in overall tax in the UK for 2023, of which £240m was taxed under the government’s windfall tax, known as the Energy Profits Levy.

Ed Miliband, Labour’s shadow energy and climate minister, said: “These results show yet again why it is so damning the Rishi Sunak refuses to bring in a proper windfall tax on the oil and gas giants. These are companies that have made record profits at the expense of working people. Labour says tax these companies fairly so we can invest in clean homegrown energy that will end the cost of living crisis and make Britain energy independent.”

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Despite the payouts the oil company is coming under growing pressure from some shareholders to address its carbon emissions. A group including French asset manager Amundi, insurance giant Axa, and the UK government’s National Employment Savings Trust (Nest) have warned Shell that is not aligned with the Paris climate agreement.

The company has been accused of watering down its green ambitions in an attempt to increase the company’s valuation by growing its liquified natural gas business and holding its oil production rates steady for the rest of the decade. Shell’s latest results showed overall oil and gas production rose by 3% in the quarter to 2.91m barrels of oil equivalent a day.

The group of large European investors, coordinated by the campaign group Follow This, plans to bring a climate resolution to Shell’s AGM to push the company to do more to reduce its emissions.

Mark van Baal, the founder of Follow This, said: “Large shareholders hold the key to tackling the climate crisis with their votes at shareholders’ meetings. Shell will only change if more shareholders vote for change. The resolution is designed to give Shell a shareholder mandate to drive the energy transition.”

The company signalled this year that it could slow the pace of its emissions reductions for this decade by setting a new plan to reduce the carbon emissions intensity of the energy it sells by 15-20% by the end of the decade, compared with its previous target of 20%. The plan, combined with cost-cutting from its low-carbon business units, has helped to improve Shell’s share price relative to European rivals including BP.

Shell’s share price reached a record high of just over £29 a share earlier this week, in part due to geopolitical upheavals of recent years that have supported higher gas and oil prices. But the company believes it could be worth more.

Its former chief executive, Ben van Beurden, last month stoked fears that the oil company would quit the London Stock Exchange in favour of a New York listing because US investors were “more positive” about fossil fuels.

Biraj Borkhataria, an analyst at RBC Capital Markets, said Shell made bigger operating cashflows for the first quarter than Exxon – after adjusting for working capital, and a similar spending budget – but still lagged behind its larger US rival in terms of market valuation. “The valuation disconnect continues to look extreme to us,” he said.

The comments reignited concerns in the City over an exodus of London’s largest listed companies to rival exchanges. These concerns were compounded this week when shareholders of Flutter, the owner of Paddy Power, voted to move its primary listing to New York. It follows the Australian miner BHP’s unsolicited takeover bid for Anglo-American, which could mean the miner disappears from the London Stock Exchange.